Facts and fallacies behind SME develop
IDWELL Medupe’s election debate article (Business Report, April 30) refers. Just like his power plant namesake, Medupe is way off the mark. Indeed, his article serves only to highlight the failures of the ANC in government – in particular, its dismal record of creating jobs.
By his own admission, the “presidency of Jacob Zuma has spent billions of rand towards job creation”. While this might be true, on analysis it’s not a bragging point.
For instance, according to Medupe’s figures, R50.8 billion has been spent through industrial financing and incentives to create 130 642 jobs. That’s R382 725 per job. A further R20bn has been spent on the 12i tax incentive, an investment which has produced “approximately” 3 326 jobs at a cost of over R6 million per job. The ANC’s interventionist policies have created very few, very expensive jobs.
Medupe, under Zuma the government has deteriorated. Statistics reveal the worsening state of our country since he took over. In the past year alone, South Africa has added 121 000 to the ranks of the unemployed. Over Zuma’s full term as president, 1.4 million more South Africans have been added to the unemployed. Our broad unemployment rate stands at 34 percent.
South Africans have every right to ask “Where are all the jobs, Zuma?”
It’s time to address the real issues preventing job creation through policy changes that focus on creating an environment in which businesses can take the lead in growing the economy and creating jobs, and move away from the ANC’s interventionist approach. The ANC, and Medupe, should stop harking on about the New Growth Path, a clear failure, and move towards the adoption of the National Development Plan.
Through the DA’s red tape initiative, we are helping business to overcome the cost and delays associated with burdensome government bureaucracy. This programme delivers new jobs, and saves us from potential job losses, at very low cost to the taxpayer.
Because we know that receiving quality education is the first step to meaningful employment, we have dedicated over a third of our budget each year to deliver better schooling to our young learners. Since 2009, we have increased the pass rate for maths from 65 percent to 73.3 percent in 2013, and for science from 52.9 percent to 72.6 percent. We have made these, and other significant gains, in just five years in government. After another five years, the impact will be far greater.
I agree with Medupe that South Africa’s challenges are not insurmountable. Under Small business ministry: the panacea for job creation? The assertions by the ANC, supported by the National African Federated Chamber of Commerce and Industry (Business Report, Readers’ Forum, April 29) and opposed by AHi (of the same date) that a small business ministry will help South Africa realise its dream of job creation of small and medium enterprises (SMEs) is premature.
The call for or against is like the metaphoric cart before the horse. Before such calls can be made we need to reflect on some basic questions, including can South African SMEs serve as engines of job creation in the economy? What are the required interventions? What roles should public and private sectors play in support of these initiatives?
It is only after these and other pertinent questions are answered will we be in a position to answer the critical question: what entity is best positioned to unleash the potential job creation through SMEs? In support of the deference of the debate about the small business ministry then we need to start at the beginning by seeking to understand whether SMEs in modern economies still possess the perceived exclusive prowess of creating more jobs than other role players.
The global paradigm that SMEs generally create more jobs than their larger counterparts is based on several assumptions and fallacies that need to be clearly understood by policymakers. Unless these and related fallacies are taken cognisance of, we are likely to have ineffective and costly policies that might not have the desired effects.
That there is a generally acceptable definition of SMEs is the first assumption. Definitions vary by country and by industry. The US Small Business Administration defines small business as enterprises that employ less than 500 people. South Africa, like the EU, uses 50 as its benchmark and Australia, 15. It is foolhardy to import lessons from elsewhere without the necessary localisation and adaptation of that underlying definitional assumption.
The second assumption is that SMEs are homogenous contemporaries that behave in the same manner regardless of age or stage in the business cycle. This is false. Research corroborates the argument that as far as job creation is concerned, age matters more that size. SME researchers have found it is the younger, not necessarily the